— Patricia Moon (@nobledreamer16) May 12, 2016
Introduction (my own, not the author of the post, John Richardson).
What country treats its own citizens worse than it treats its immigrants?
Phil Hodgen’s Expatriation Letter of the Week is based upon this concept: whether tax liability of a green-card holder depends upon residency only or whether it includes other factors to consider in order to protect oneself from the long and complicated arms of IRS regulations. The example is simple and offers no less than 5 possible ways to deal with ending a non long-term status as a permanent resident of the United States. It is astounding that so much can be involved for a residence of 3 months with no income earned (US source or otherwise). Only in the USA could things be this complicated and full of possible issues (audits, penalties, etc).
Someone who is a nonresident will only be required to file a U.S. tax return because of:
- receiving income from U.S. sources; or
- being engaged in business in the United States, even if zero income is derived from it
Without unusual complicating factors, the general idea that one owes the US any tax is based upon either being a resident, or if a non-resident, having US-sourced income. What is interesting is that if one is a non-resident US citizen, none of the possibiities that apply to immigrants to the US are available to citizens. Phil’s letter is a demonstration of the extent of possibilities available to some but denied to other non-residents based only upon their place of birth.
This post, in addition to Physical presence as a necessary condition for being a US “resident” under the Internal Revenue Code , emphasizes the importance of physical presence as a condition of liabiity for U.S. taxation. Phil’s letter speaks to the (ridiculous) lengths the IRS will go to avoid taxing anyone who can prove they are a non-resident alien. This speaks to the level of residence-based taxation that is in reality, practiced by the U.S. and which shows the U.S. to be basically like any other country. If we want to get rid of CBT, we need to build arguments to point to practical issues as well as Constitutional ones. At present, to my mind, it makes a lot of sense to build the arguments based upon practicality. This removes the “pay-one’s-share” issue in a non-confrontational way. To immediately hit the “patriotic” “you-owe-us-everything-for-the-privilege-of-your-U.S.-birth” types with “CBT-is-a-violation-of-our-human-rights” is to close a door before it is even opened. We can see that readily from the inability of almost everyone to discern the difference between non-resident “foreign” accounts held for legitimate purposes versus those held by resident Homelanders for purposes of tax evasion.
Please take the time to consider these points and start building them into your comments to online articles, letters to representatives etc. This is an arrow they won’t see coming.
Tax jurisdiction and residential ties
The two types of residential ties considered for all aliens
When considering the meaning of “residence” for tax purposes, attempting to ascribe a place of “residence “to an individual, and imposing taxation on individuals, the Internal Revenue Code considers:
A. The extent of “residential ties” to the United States; and
B. The extent of “residential ties” to another country.
We see both aspects of residence considered as a way to defeat the “substantial presence” test in Internal Revenue Code S. 7701(b). If the country of residence is uncertain, or if a person is considered to be a “tax resident” of the United States and another country, the Internal Revenue Code considers ties to both the United States and the other country in question.
For “resident aliens” (Green Card Holders):
- both past and present residential ties to the United States and to other nations are considered in at least 3 ways under the Internal Revenue Code itself; and
- residential ties to both the United States and the other country of residence are considered in determining residence under Article IV of the Canada U.S. (and other) tax treaties**.
Green Card Holders and tax residence
previous post discussed the fact that:
- Internal Revenue Code S. 7701(a)(30) defines “U.S. Persons”
as including “citizens” and “residents”
- The combined effect of Internal Revenue Code S. 7701(b)(1)
and S. 7701(b)(6) define Green Card Holders in a way that
ensures that they meet the statutory test of “residence”. (Of
course Green Card Holders may be able to defeat the status of
“resident” by making use of the Treaty Election in Article IV of
the Tax Treaty)
- The statutory defenses to “residence” found in S. 7701(b) of
the Internal Revenue Code, available to “aliens” who are NOT
Green Card Holders, take into account and are a function of the
extent of residential ties to other jurisdictions
Residence matters and residence matters hugely. Hence, the definition of “resident” matters and matters hugely.
Please see more here